A small number of European banks have been invited to start transferring funds using the blockchain, as part of a pilot collaboration between Visa and BTL Group.
The credit card company and blockchain technology developer have teamed up to create the proof of concept, which uses BTL’s cross-border settlement platform Interbit and leverages smart contracts to automate regulation and compliance requirements. It is now ready to be used for real bank-to-bank transactions, as an alternative to the widely-used Swift messaging system.
Guy Halford-Thompson, CEO of BTL Group, tells GTR that “theoretically” there is no limit to the amount that can be transferred on the platform, and that, therefore, this pilot phase could see the execution of the first trade finance transfers on the blockchain.
“This pilot we’re running is to explore bank-to-bank payments of any nature so we’re not making it specific to personal finance or trade finance. We’re interested in how that money moves between those financial institutions. It could be used for any type of process,” he says.
The names of the banks involved in the pilot have not yet been disclosed, but should be revealed in the coming weeks and months. “We’ll be disclosing a lot more information throughout the pilot, talking about the banks that are coming on board and how the pilot’s going and what we’re learning from it. This is a first of its kind pilot in its nature,” adds Halford-Thompson.
He explains that although BTL Group has offices in Vancouver and London, it made more sense to trial the technology in Europe, “the fintech capital of the world”, where the majority of banks have a presence.
“London and Europe is where we’re seeing more forward-thinking progress in the financial institutions. There’s also a lot more banks available to us in Europe than in North America and Canada. We see a lot more movement from European banks, and most major banks today have their headquarters in Europe somewhere as well.”
We’re interested in how that money moves between those financial institutions. It could be used for any type of process. Guy Halford-Thompson, BTL Group
While there is no exact timeline, Halford-Thompson believes the pilot phase will last until “the first few months of next year”.
“This is a very exciting project for us. We’re very excited by the reception we’ve had from the financial institutions so far. It’s a great opportunity for BTL to showcase the core technology in the blockchain platform we’ve been working on for quite a long time now. It’s very exciting to start to showcase what’s actually going on behind the scene, under the hood,” he says.
In a blog post announcing the initiative, Hendrik Kleinsmiede, co-founder and innovation partner at Visa Europe Collab, explains: “For me the opportunity is a fascinating and potentially very beneficial one. Through the use of smart contracts and blockchains I believe we can create a fast, compliant and low-cost interbank payment and settlement service, with embedded regional compliance.”
Blockchain technology, which uses a distributed ledger to make transaction data immutable and visible to all parties involved, has been at the forefront of trade finance innovation for over a year now. A number of pilots have been launched over the past few months, most recently by Hitachi and BTMU, Bank of America Merrill Lynch (BofAML), HSBC and the Infocomm Development Authority of Singapore (IDA) and 40-strong bank consortium R3 CEV.